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China Construction Bank

Construction Bank profit grows 11pc on interest income and cost controls

PUBLISHED : Monday, 31 March, 2014, 5:27am
UPDATED : Monday, 31 March, 2014, 7:52am

China Construction Bank, the mainland's second-biggest bank by assets, recorded an 11 per cent gain in net profit to 214.7 billion yuan (HK$270 billion) for last year, thanks to steady growth in net interest income and effective control of operating costs.

Net income was higher than the 193.2 billion yuan recorded in 2012, said the earnings statement posted on the website of the Hong Kong exchange yesterday.

Net interest margin stood at 2.74 per cent last year, one basis point lower than 2012 but still pushing up the bank's net interest income by 36 billion yuan.

"The bank cultivated and improved its pricing ability under the condition of interest rate liberalisation, refined its pricing models and authorisation management, enhanced the pricing support for branches and the bank counters, and improved its deposit and loan pricing ability," it said in the statement.

It became the mainland's third Big Four bank to beat estimates.

Bank of China and Industrial and Commercial Bank of China, which was recently named the most profitable lender in the world, also beat estimates when they released their fourth-quarter earnings last week.

Shares of Construction Bank have declined 8.4 per cent this year in Hong Kong, compared with the benchmark Hang Seng Index's 5.3 per cent drop.

The bank's net fee and commission income grew 11.52 per cent in 2013. The biggest increase came from bank-card fees, which jumped 28 per cent to 25.8 billion yuan. Fees from credit cards surged nearly 50 per cent.

"[We] further improved [our] cost management and optimised its expense structure, resulting in a significant decrease in the growth rate of operating expenses compared with that of 2012," the bank said.

Operating expenses stood at 188 billion yuan last year, up 10 per cent over 2012. The growth rate in operating costs in 2013 was the slowest since 2010.

Construction Bank predicted liquidity in the interbank market would stay tight and market interest rates would still experience big fluctuations this year, making it increasingly difficult for lenders to gauge and manage liquidity positions.

The greater participation of privately owned banks and the rapid development of internet finance would also intensify competition.

Construction Bank's non-performing loans were 85 billion yuan, an increase of 10.7 billion yuan, while its bad-loan ratio was 0.99 per cent, unchanged over the previous year. The proportion of so-called "special mention" loans, or those not classified as non-performing loans but considered at risk, slid to 2.38 per cent, 0.34 percentage point lower from 2012.